USD, NZD/USD, GBP/USD Analysis & News
QUICK TAKE: Nasdaq Whacked by US Rates Rally, GBP Overnight Spike Faded
Equities: Once again the bond market is making the loudest noise with the US 10yr breaking to 1.43, while the 2s10s curve is at its steepest since the backend of 2016, which in turn has got tech stocks listening as the Nasdaq underperforms. Unlike ECB’s Lagarde who stated that the ECB is watching nominal yields, Fed Chair Powell appeared less fazed at yesterday’s testimony, noting that the move in the bond market is a statement of confidence. In turn, with the Fed remaining calm at present, US rates are likely to test to the Fed going forward.
Euro Stoxx 50 Sector Breakdown
Outperformers: Energy (0.5%), Basic Materials (0.4%), Industrials (0.4%)Laggards: Consumer Staples (-0.7%),Utilities (-0.5%), Consumer Discretionary (-0.4%)
US Futures: S&P 500 (-0.2%), DJIA (-0.2%), Nasdaq 100 (-0.7%)
Intra-day FX Performance
FX: NZD is firmer post the RBNZ decision. As widely expected, the RBNZ stood pat on current monetary policy with the OCR and LSAPs left unchanged.The overall message by the RBNZ was not entirely surprising with the central bank recognising the recent run of stronger than expected domestic data. On negative rates, the RBNZ noted that they can go negative if required following the completion of their operation review. However, with risks broadly balanced, it is unlikely the RBNZ will go down this route, particularly after providing a notable lift in their OCR forecast. (Full recap)
GBP: The Pound spiked higher during the APAC session, with GBP/USD hitting a high of 1.4235, GBP/JPY briefly touching 150 and EUR/GBP breaking down to 0.8544. While market participants can get caught up trying to fit the move with a piece of news, there was no fundamental catalyst/headline behind the move. Reminder, the APAC session tends to be relatively scarce in terms of liquidity and then moves can often happen during these hours (remember the Jan 3rd 2019 flash crash). My assumption is that the move may have been triggered by stops taken out in EUR/GBP from 0.8600 and given the thin liquidity conditions, this had exacerbated the move. Since Europe and the US have entered the fray, GBP has gradually eased throughout the session.
GBP Spike: GBP/USD, EUR/GBP, GBP/JPY, GBP/CHF
Source: Refinitiv
| Change in | Longs | Shorts | OI |
| Daily | 9% | -17% | -9% |
| Weekly | -8% | -3% | -5% |
USD: The USD has put in an attempt to make a recovery, led by USD/JPY, which breaks back above 106.00, just shy of the weekly highs at 106.20-25. The move could be related to month-end flows, with USD corporate demand tending to take place a few days before month-end rebalancing on Friday. In turn, these moves may see bears look to reengage and fade the move.
Looking ahead: Fed speak will continue to be watched with Vice-Chair Clarida and Fed’s Brainard scheduled. Watch for comments regarding US yields.
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